Opinion

Tax cuts — a political game of chicken

Both Democrats and Republicans are playing with ire this fall — with debates over new tax legislation likely to run right into the midterm elections.

Democrats are campaigning vigorously to eliminate sweeping tax cuts enacted in 2001 and 2003 under President George W. Bush for all Americans except individuals earning less than $200,000 and married couples earning under $250,000. Democrats have tarred the Republican-sponsored tax cuts, due to expire at year’s end, as deficit-busting giveaways to “rich” Americans who don’t need them, and aim to put the GOP on the spot in September with a vote on legislation that would extend them only for the middle class.

Yet Republicans are equally eager for that vote, believing the Democrats have handed them a political opening as wide as health care reform — one that could help them solidify their growing advantage with voters.

Republicans are confident they can frame the Democratic plan as a tax hike on small businesses, contending that voters will reject such a move in the midst of a lingering recession and near 10% unemployment. With both sides convinced that they have the political advantage, the legislative and electoral battle is set to escalate.

The debate will take center stage after Labor Day, when the House and Senate return to work.

According to the Democratic plan, individuals and families who fall in the present 10%, 25% and 28% income tax brackets, as enacted under Bush, would see no changes. Those in the 33% and 35% brackets would see their rates rise to 36% and 39.6%, respectively.

But many small businesses file their taxes as individuals and fall into the upper income brackets, and the GOP plans to use this fact to fuel its attack on Obama and the Democrats that anything other than a full extension of the tax cuts would hamper job growth for out of work Americans and depress wages for those who already have a job.

Democrats need at least one Republican to switch sides — and none of their own to defect — to pass their legislation through the Senate. If nothing passes, taxes for everyone go up beginning Jan. 1. Neither party wants that — so who will blink first?

David M. Drucker covers Congress for Roll Call.